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Target president and CEO Gregg Steinhafel speaks during an event announcing a holiday collection that partners Target and Neiman Marcus in New York, in this Oct. 16, 2012 file photo. REUTERS/Keith Bedford/files

Target Corp. removed Chairman and Chief Executive Gregg Steinhafel on Monday in the wake of a devastating data breach that hurt the No. 3 U.S. retailer's profits, shook customer confidence in the company and prompted congressional hearings.

The departure of the 35-year company veteran also follows Target's botched multi-billion dollar expansion into Canada.

"After extensive discussions, the board and Gregg Steinhafel have decided that now is the right time for new leadership at Target," the company's board said in a statement.

Steinhafel, 59, had been Target's CEO since 2008.

The Minneapolis-based company named Chief Financial Officer John Mulligan as interim chief executive, and Roxanne Austin, a member of Target's board of directors, as interim non-executive chair of the board.

Target's shares fell as much as 3% in morning trading.

Brian Sozzi, chief executive of Belus Capital Advisors, said he thought Steinhafel's exit was a few months overdue. "I think the news today reflects Target's initiative to completely get behind this issue," he said, referring to the data breach.

Target disclosed in December that a cyber attack had resulted in the theft of at least 40 million payment card numbers and 70 million other pieces of customer data.

Mulligan has been the company's chief spokesman on the issue, testifying at several congressional hearings where he was grilled for details about Target's security operations, how it learned of the breach and how quickly it notified the public.

Target spokeswoman Dustee Jenkins said Mulligan had been selected as interim CEO because of his role in helping the company respond to the breach. "We believe he is suited for this. He has played a key role in the recovery efforts," she said.

The company said it has hired executive recruiting firm Korn Ferry to help the board find a new CEO. Steinhafel will stay on in an advisory role until a permanent replacement is found.

Daniel Ives, who follows security firms at FBR Capital Markets, said he believed Steinhafel is the first CEO to be removed following a major corporate data breach.

FALLING PROFITS

Apart from the breach, Target has had to negotiate a weak U.S. retail environment.

The company's push into Canada has also proven to be costlier than expected and sales have fallen far short of expectations. The company reported a loss of nearly $1 billion in Canada in 2013 on sales of $1.3 billion.

Overall, the company reported a 34% drop in net profit last year to $1.97 billion.

Analyst Ken Perkins of investment research firm Morningstar said the performance in Canada would have contributed to Steinhafel's departure.

"Clearly the data breach was not good publicity ... but in terms of an executive decision from a strategy point, the entry in Canada has really not gone the way company planned," he said.

The breach at Target was the second largest at a U.S. retailer. The theft of more than 90 million credit card details over about 18 months was uncovered in 2007 at TJX Cos Inc., operator of the T.J. Maxx and Marshalls chains.

The impact of the breach is expected to have continued into the first quarter of the year. Analysts on average expect the company to report a fall of about 1% in first-quarter same-store sales when it releases results in two weeks, according to Thomson Reuters I/B/E/S.